“We retain our overweight in resources, in part due to an expectation of solid global growth supporting commodity prices, but also because of relatively undemanding valuations and the ability of the resource sector to act as a hedge against rising inflation and interest rates,” the pair said.

None of the big four banks made the list, with the two analysts neutral on the sector. They described the recent reporting season as “marginally disappointing” with Westpac,ANZ and NAB all reporting full-year results to the end of September.

UBS remains underweight in real estate investment trusts (REITs), “but less so than this point last year given better relative valuations”.

The analysts are also underweight sectors they deem to have high price-to-earnings valuations. That includes healthcare, online media and companies exporting consumer goods to China.

The bank has a 2018 market target of 6275 for the ASX200 — an increase of 5.2% from the current level.

The local index closed yesterday at 5,963.52, and is set to open higher this morning after the US S&P500 index rose to a new record high overnight.

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